The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $650 billion equipment finance sector, showed overall new business volume for March declined by 30 percent when compared to the same period in 2008. For the first quarter of 2009, new business volume declined by 31 percent as compared to the first quarter of 2008. New business volume contracted by 17 percent in the fourth quarter of 2008, year over year (revised). Month-to-month new business volume increased 42.4 percent from February to March, from $3.3 billion to $4.7 billion.
The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is a financial indicator that complements other relevant economic indices, including the monthly durable goods report produced by the U.S. Department of Commerce, which reflects new orders for manufactured durable goods, and the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete picture of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
The MLFI-25 reported receivables over 30 days increased to 5.0 percent as compared to 4.5 percent in February. Charge-offs increased to 2.21 percent from 1.74 percent in the prior month and more than doubled March 2008 losses. Credit approvals dropped to 64.3 percent from 64.7 percent. Forty-seven percent of participant companies reported that fewer transactions were submitted for approval during the month, due to tightening underwriting standards and lower demand. Total headcount for equipment finance companies showed a slight decline in March (0.95%).
"The contraction in the nation's economy is clearly being felt in the commercial sector as both new business volume numbers and Member company reports indicate a decided slowdown in demand for investment in capital goods," said ELFA president, Kenneth E. Bentsen, Jr. "The combination of slack demand and tighter underwriting standards put a damper on the U.S. equipment finance market in the first quarter, following on a decline that began in the prior quarter," Bentsen said.
Bill Verhelle, CEO of First American Equipment Finance in Fairport, NY and Immediate Past Chairman of the ELFA commented on the MLFI data. "The magnitude of the first quarter decline in US business capital equipment financing activity (more than 30 percent on a seasonally adjusted basis) may indicate that a big pull-back in business equipment spending is now compounding the ongoing consumer spending decline," said Verhelle.
First American Equipment Finance is a participant in the MLFI survey. "Until the fourth quarter of 2008, MLFI data indicated that the recession had not slowed capital equipment acquisitions. U.S. businesses now appear to be dramatically cutting equipment acquisitions," Verhelle said.
About the ELFA's MLFI-25
The MLFI index is released globally at 9:00 a.m. Eastern time from Washington, D.C. each month, on the day before the U.S. Department of Commerce releases the durable goods report. More information on the Monthly Leasing and Finance Index, including methodology and participants is available below and at
The ELFA produces the MLFI-25 survey to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information to support strategic business decision making.
The MLFI-25 is a barometer of the trends in U.S. capital equipment investment. Five components are included in the survey: new business volume (originations), aging of receivables, charge-offs, credit approval ratios, (approved vs. submitted) and headcount for the equipment finance business.
The MLFI-25 measures monthly commercial equipment lease and loan activity as reported by participating ELFA member equipment finance companies representing a cross section of the equipment finance sector, including small ticket, middle-market, large ticket, bank, captive and independent leasing and finance companies. Based on hard survey data, the responses mirror the economic activity of the broader equipment finance sector and current business conditions nationally.
The results of each MLFI-25 are posted on the ELFA website. ELFA is the premier source for statistics and analyses concerning the equipment finance sector. Please visit http://www.elfaonline.org/ind/research/ for additional information.
Participants in the ELFA MLFI-25:
- ADP Credit Corporation
- Bank of America
- Bank of the West
- Canon Financial Services
- Caterpillar Financial Services Corporation
- De Lage Landen Financial Services
- Dell Financial Services
- Fifth Third Bank
- First American Equipment Finance
- Hitachi Credit America
- HP Financial Services
- John Deere Credit Corporation
- Key Equipment Finance
- Marlin Leasing Corporation
- National City Commercial Corp.
- RBS Asset Finance
- Regions Equipment Finance
- Siemens Financial Services
- Susquehanna Commercial Finance, Inc.
- US Bancorp
- Tygris Vendor Finance
- Verizon Capital Corp
- Volvo Financial Services
- Wells Fargo Equipment Finance